Modelling advertising budgeting and allocation decisions using modified multinomial logit market share models

Modelling advertising budgeting and allocation decisions using modified multinomial logit market share models

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Article ID: iaor19992240
Country: United Kingdom
Volume: 49
Issue: 12
Start Page Number: 1260
End Page Number: 1269
Publication Date: Dec 1998
Journal: Journal of the Operational Research Society
Authors: ,
Keywords: game theory, statistics: regression, advertising
Abstract:

Previous research suggests that a multinomial logit model of market share (MNL) is inappropriate for equilibrium analyses of advertising competition. This article shows that when employing simple tranformations of the advertising effort, the modified MNL model becomes useful in representing situations of diminishing returns to advertising and appropriate for advertising equilibrium analyses without additional difficulties in its empirical estimation. Using the modified MNL model, optimal advertising budgets together with their allocation over time are derived for both the cases of concave and S-shaped attraction (response) functions in a symmetric oligopoly.

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